Tonight, President Obama will speak to the nation during his State of the Union address and propose a plan to cut student loan payments for millions across the country. In this post, we discuss the major points of this new plan as they pertain to student lending and paying for higher education.

Summary of Proposed Changes to Student Lending

Payments on federal loans will be capped at 10% of a borrower’s income above $33,075*.

Those who earn less than $33,075 annually would owe nothing on a monthly basis.

Federal loans to be forgiven after 20 years instead of 25.

*Under President Obama’s plan, someone who earns less than 150% of the poverty level owes nothing monthly and those who earn more will have payment s capped at 10% of their income. The poverty line for a family of four is $22,050 and 150% of that is $33,075.

Remember to maximize federal loans before turning to alternative sources of funding. Under this new plan, federal loans are now more attractive than ever. Once you’ve applied for your federal loans, you can now tap into private student loans to cover your tuition.
Best of luck this semester!

Federal loan information: All colleges participate in the Direct Lending program, which means a student enrolled at that school receives their federal student loans (including Stafford, PLUS and GradPLUS loans) directly from the school instead of from a lender.